Abstract

The first paper, "Interest rate pass-through and financial crises: do switching regimesmatter? The case of Argentina", analyses the dynamic relationship between a moneymarket (interbank) rate and different short-term lending rates by measuring their passthrough.Neither linear single-equation modelling nor linear multi-equation systemscapture efficiently this relationship. Several financial crises alter the speed and degreeof response to interbank rate shocks. Hence, a Markov switching VAR model shows thepass-through increases considerably for all market interest rates in a high-volatilityscenario. The model identifies correctly the periods in which regime shifts occur, andassociates them to financial crises.The second paper, "Modelling interest rate pass-through with endogenous switchingregimes in Argentina", extends the scope of the Markov switching modelling byincluding time-varying transition probabilities. Interest rate spreads are used as leadingindicators. The model allows devaluation expectations and country risks, (measured byrate spreads) to signal regime switching. Estimation results suggest that the passthroughtends to overshoot with financial instability, but to decrease if that condition issufficiently large and long-lived. Likewise, results show a quite heterogeneous creditmarket, with a highly efficient transmission mechanism in the corporate segment, butconsiderably less in the consumer segment.The final paper, "Regime switching in interest rate pass-through and dynamic bankmodelling with risks", builds a theoretical model of dynamic bank optimisation, whichprovides rationale to a regime-switching behaviour in the interest rate pass-through. It isshown that a regime-switching interbank rate induces a nonlinear behaviour in lendingand deposit rates and (by further introducing interbank-alike regime-switching riskpremiums) in the pass-through. Thus, the pass-through process is consistent with anonlinear behaviour even if there are no asymmetric adjustment costs in the response tointerbank rate shocks. An empirical application to France and Germany provide resultsthat support these conclusions.